Would you rather own your living space instead of dealing with pesky landlords and rules about what you're allowed to do in your abode? If so, you're like many Americans who would rather be homeowners instead of renters.
Sure, apartments offer flexibility. If you're planning to move around a bit while you continue on your academic career, for example, renting is best, as you can't be tied down to one location. However, when you're ready to start a family, apartments may not cut it. Of course, you can rent homes and condos, but do you want to deal with the hassle of having to move every time the rent goes up or a landlord doesn't want to renew your lease?
Although many renters are dealing with these frustrations, there's no guarantee they're ready to be homeowners. As much as we'd love for you to come down to a branch and apply for one of our mortgages today, we want to ensure you understand what it takes to buy a house first. Here are some questions to ask yourself while making the decision:
Do I have enough saved for a down payment?
While home loans can cover most of the cost of the house you find, you'll have to pay some of the price out of pocket at the closing table. This down payment typically is equal to 20 percent of the appraised value of the home you want to buy. If you're considering a property that's appraised for $300,000, for instance, you'll have to fork over $60,000 when you close.
There are several ways people gather the funds needed for a down payment. If you have generous parents or other family members, you may be able to get the money as a gift. Additionally, you can open a savings account and put a little bit of cash away over time until you have a sufficient amount.
Do I have emergency savings?
As a homeowner, you'll be responsible for all maintenance duties and costs related to your property. If your plumbing decides to back up in the middle of the night, there won't be a landlord you can call to look at the issue. In addition to getting your hands dirty, you'll have to foot the bill for the repairs. Depending on the severity of the damages, you could be shelling out a lot of money, which is why you need an emergency fund. This money can cover unexpected costs, such as a heavy storm causing a tree to crash through your house.
Is my debt under control?
Using a credit card is a great way to build credit and get access to funds when you need it. However, large amounts of this and other types of debt aren't beneficial if you want to become a homeowner. First, we will assess your debt before we grant you a mortgage. If you have too much debt compared to your gross monthly income, there's a chance you won't be approved. Second, you may have too much on your plate already, leaving little room for monthly mortgage payments, utilities, homeowners insurance and property taxes.
Don't fret if you have a lot of debt. Take some time to pay down your balances before you start your homebuying journey. While this may mean you have to forgo swiping your credit card for new shoes, regular dinner dates and late-night runs to the store for junk food, you'll be able to achieve your homeownership goals in no time.
For more information about smart ways to manage your finances, contact Landmark Bank.
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